Cryptocurrency markets experienced a significant downturn on Friday as risk-off sentiment from traditional markets spilled over into digital assets.
During the afternoon trading session in the United States, Bitcoin (BTC) plummeted below the $66,000 mark, a stark contrast from its earlier challenge of $71,000. As of press time, Bitcoin had managed to recover slightly to $66,700, marking a decline of over 5% within the past 24 hours.
Ether (ETH), the second-largest cryptocurrency by market capitalization, also took a hit, dropping by as much as 12% to $3,100 before a modest rebound trimmed the losses to 8%.
The broader cryptocurrency market saw even steeper declines. Leading altcoins such as Cardano’s ADA, Avalanche’s AVAX, bitcoin cash (BCH), filecoin (FIL), and aptos (APT) experienced losses ranging from 15% to 20%.
The sharp downturn triggered a significant liquidation event in leveraged derivatives trading, with approximately $850 million of leveraged positions across all digital assets being liquidated. Long positions, which bet on rising prices, accounted for around $770 million of the liquidated positions.
The market decline coincided with a broader sell-off in traditional markets, as concerns over escalating geopolitical tensions in the Middle East fueled risk aversion. U.S. authorities issued warnings of a potential significant attack by Iran on Israel, leading investors to seek refuge in Treasury bonds and the U.S. dollar.
In response to the heightened risk environment, key U.S. equity indices such as the S&P 500 and Nasdaq 100 slipped by 1.7% just an hour before the close of the trading session. Gold, a traditional safe-haven asset, surged to a new all-time high above $2,400 before retracing some of its gains, while oil prices edged up by 1%.
Commenting on the market conditions, digital asset investment firm Ryze Labs cautioned investors to expect short-term weakness in crypto assets due to the upcoming tax season. However, the firm maintained a positive long-term outlook, anticipating relief for the asset class as policymakers adjust monetary policies to facilitate U.S. government debt rollovers and slow quantitative tightening.
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